Last resort arrangements

The Water Industry Competition Act 2006 (WIC Act) includes provisions that ensure the continued supply of water and sewerage services in the event that a licensed retail supplier fails or becomes unviable. These provisions, referred to as retailer of last resort arrangements, are designed to protect customers and are similar to those that apply in the energy industry.

The Metropolitan Water Directoreate is currently reviewing the adequacy of the retailer of last resort (RoLR) arrangements under the WIC Act.

While there are broad provisions for a retail supplier licensee failure, the WIC Act does not have any arrangements in place that would respond to a licensed network operator failure – operator of last resort (OoLR) arrangements. Therefore, the review will also consider arrangements that should be in place to address a licensed network operator failure.

The Minister can declare a public utility or a licensed retailer to be a retailer of last resort. The retailer of last resort must start supplying water or providing sewerage services when the Minister declares a supply failure in relation to a licensed retail supplier.

The Minister can declare a supply failure if, for example, the licensee is unable to supply water or provide sewerage services to some or all of its customers. This could occur due to the commercial failure of the retailer. The former retailer’s customers then become the customers of the retailer of last resort for these services.

Compared to retailer of last resort schemes in the energy industry, the provisions under the WIC Act lack the necessary detail of a comprehensive retailer of last resort scheme. In addition, there are no provisions that would respond to a licensed network operator failure (an operator of last resort event) or a combined failure of a network operator and retail supplier.

The Metropolitan Water Directorate has commenced a review to:

review the adequacy of the retailer of last resort provisions under the WIC Act and identify a preferred set of arrangements

identify a preferred option for operator of last resort arrangements.

Review discussion paper

As part of the review, the Metropolitan Water Directorate prepared a discussion paper to generate stakeholder feedback in relation to:

the principles and objectives that should underpin a retailer of last resort and operator of last resort scheme

the issues that must be addressed in developing the detailed provisions that will make up the retailer of last resort and operator of last resort scheme.

For a copy of the discussion paper see below.

In August 2011, over 300 stakeholders were invited to comment on the discussion paper. The Directorate received 19 submissions from government and private agencies, which are listed below.

Next step

To facilitate the development of a RoLR and OoLR framework, an options paper is being prepared for further public consultation.

Based on the feedback from the options paper a recommendations report will then be provided to Government for consideration.